The Scheme – first there were just word games (Chapter 2)

Water, water everywhere
nor any drop to drink.
Water, water everywhere
now insurance won’t sink
.

The word game started with water – lots and lots of water – lifted by Katrina’s powerful winds, waves became walls of water – collapsing with such force water went further inland than shown on any flood map. New Orleans, the Big Easy, became the only bowl it never wanted and, those playing the word game began calling Katrina, the windstorm, the Great New Orleans Flood.

Immediately after Hurricane Katrina came ashore, and before anyone could possibly assess the damage, the insurance industry began pushing the message that the damage was caused by flooding, rather than wind.  “The fact that a government-run levee fails and creates a flood does not create a liability for private insurers,” said Robert Hartwig, chief economist with the Insurance Information Institute in New York.  “I would say on dollar terms, at least among homes, the majority is related to floods.”

The distinction was important because wind damage is covered under homeowner policies – flooding is not.  Industry representatives took the message one step further when they tried to spin the story as “The Great New Orleans Flood”.

The phrase first appeared in a press release issued by insurance industry Risk Management Solutions (RMS), just three days after Katrina made landfall.  RMS claimed that the following would account for at least 50% of the anticipated total economic losses, and that, “The 2005 Great New Orleans Flood has developed into the most damaging flood in U.S. history.

Winning this round of the word game was a natural for RMS, the world’s leading provider of products, services, and expertise for the quantification and management of catastrophe risk.  Little more than 60 Continue reading “The Scheme – first there were just word games (Chapter 2)”

Rebecca Mowbray – Insurance policies will exclude coverage for floods from broken dams and levee breaches STARTING in January

After reading Rebecca Mowbray’s story in today’s Times Picayune, it’s likely many others now join SLABBED in wishing we could have said good-bye to David Maurstad before we ever met him.  Be certain to keep in mind this quote from reader CLS in our farewell as you read about the new policy language.

If there is no EXCLUSION, then it’s INCLUSIVE. Surely, as head of FEMA/NFIP Mr. Maurstad must have read the exclusions under the federal NFIP contract.  Every single Allstate NFIP policy was paid in FULL to the maximum policy limits. ( Nice job Mr. Maurstad and Mr. Wooley)

Editilla at the Ladder will no doubt agree with NOLA attorney Jim Garner in no uncertain terms.

After arguing in court that water from levee breaches shouldn’t be covered by insurance policies, the insurance industry now says it really means it.

As a result of the litigation in New Orleans over Hurricane Katrina, starting in January insurance policies around the country will contain language specifically excluding coverage for manmade floods from broken dams or levee breaches.

But Jim Garner, an attorney who represented the New Orleans homeowner in the case that went to the Louisiana Supreme Court, and who represented Xavier University in the case before the 5th U.S. Circuit Court of Appeal, said the language change proves that most of the policies that were in force when Katrina hit were ambiguous, and insurers should have paid.

“I think it underscores why the people were right. If it was so clear, why did they have to go change it?” Garner said. “The industry knew there was a problem. They’ve now admitted it.” Continue reading “Rebecca Mowbray – Insurance policies will exclude coverage for floods from broken dams and levee breaches STARTING in January”